10 Dec 10
NTLG Superannuation Technical Sub-committee
Tax Counsel Tamera Lang ATIA and Gabrielle Teys FTIA (JB Were) attended the NTLG Superannuation Technical Sub-committee teleconference held on 8 December 2010. The ATO provided a litigation update and noted that the Commissioner has lodged an appeal in the Federal Court in respect of McMennemin v Federal Commissioner of Taxation  AATA 573. A number of technical questions raised by members were discussed. The first issue was the interpretation of s.66(1) of the SIS Act in respect of a SMSF engaging a related party on commercial terms to construct a building using goods and materials supplied by the related party. The ATO did not accept the argument that the act of constructing a permanent structure on real property owned by the fund and the goods/materials used in that structure, could be viewed as the performance of a service. The ATO stated that its views had been clearly stated in SMSFR 2010/1 and the ATO view remains that set out in the ruling. Practitioners raised concerns about auditors that provide an audit report to SMSF trustees after the due date for lodgement of the fund's annual return, which results in a breach of the SIS Act. Practitioners pointed out that auditors may breach the provisions if the trustee fails to appoint the auditor within the prescribed time or fails to provide the required documents, or the delay may be caused by third parties. It was suggested by practitioners that there should be an amendment to the law to protect the auditor. The ATO acknowledged that, regardless of the reasons for not being able to do so, an auditor will contravene s.35C(6) of the SIS Act and may lead offences being committed. The ATO is supportive of registering this issue on TIES, so that the legislation may be changed so that auditors are not held to commit an offence where the late provision of the audit certificate is due to circumstances beyond their control. Finally, limited recourse borrowings were briefly discussed. The ATO is continuing work on the matters discussed at the workshop in November, but they are not yet in a position to discuss their final views. The Professional Bodies have drafted a submission to the ATO on the possibility of using accounting principles to interpret the "single acquirable asset" requirement. It is hoped that using accounting principles will lead to a more commercial and practical solution. The Professional Bodies are urging the ATO to issue clear guidance on these provisions as soon as possible, as there is an urgent need for clarity.